I really don’t like being a resident doomsayer, but organizational hiring and promotional practices are generally so abysmal that I am compelled to make it a big issue. Take EEOC tracking, for example. Most people think all they have to do is send in routine normal reports. Not so. They should be monitoring adverse impact throughout their entire hiring process.
According to the EEOC, and best practices in general, each employer should be monitoring adverse impact by using the following rule of thumb:
- Calculate the pass rate of your majority demographic group.
- Calculate the pass rate of your minority demographic group.
- You have adverse impact if the fail rate of the minority group is more than 80% of the majority group. For example (same job): male pass rate = 50%, female pass rate = 35%. Test: ….80% x 50% = 40%; however, only 35% of females are hired; therefore, the organization is guilty of adverse impact against females.
Does that sound complicated? Well, maybe this article will help clear it up.
What’s an “Applicant?”
This used to be quite clear: applicants were people who showed up and filled out a form. Now, no one is quite sure when a person becomes an applicant. Is it when 100 people respond to an Internet post? When 50 people are phone-screened? When five people are invited for an interview?
Although it will probably be years before there is a universally accepted definition, every organization should have a formal policy that makes a reasonable argument for when someone qualifies as an applicant. Your local labor lawyer should be able to help you draft something that works. Just be sure to follow policy until the legislators tell you otherwise.
Generally, only larger organizations (e.g., with 15 or more people) need to be concerned; however, as your public presence grows, so does the public’s perception of your financial pockets. Remember, just because most challenges are settled, not court ordered, you don’t get off cheap. Also, some organizations are exempt, so be sure to check with your local labor law attorney.
What’s a Minority?
Certain groups are usually people who are protected by law: the disabled, different races, females, 40 and over, people with different beliefs, and so forth. Check with your local labor lawyer.
Why a Labor Lawyer?
You wouldn’t go to a podiatrist if you had a heart problem, would you? Law is a pretty big field and corporate attorneys are generally skilled in contract and business law. Labor law is a specialty. You usually get better advice from a specialist than a generalist.
Now, one more problem. My experience with corporate and labor lawyers is they know the law, but they don’t know how to build HR systems that keep you out of trouble. In fact, in the last 17 years of practice, I have only met one attorney who understood how to build a legally credible hiring system. The rest wait until the end of the meetings and quietly ask me for copies of the DOL Guidelines.
What’s Adverse Impact?
Adverse impact is when a selection system (applications, interviews, tests, resume screens, sources, and so forth) rejects too many legally protected applicants using the 80% (i.e., the 4/5) rule. But that raises another question: is adverse impact illegal? No.
Organizations have the right to reject unqualified applicants (even people who belong to protected groups) as long as they can produce the following:
- A professional job analysis.
- Proof that scores on tests predict future job performance.
- Evidence that tests are based on job requirements and business necessity.
- Evidence they constantly look for better ways to reduce adverse impact.
Remember, interviews are tests.
Some folks argue that organizations should “dummy-down” their jobs so anyone and everyone will qualify for a job, regardless of protected group membership. To the best of my knowledge, most of these folks are either politicians running for public office, politicians trying to keep their job, or people who have never run a business.
Unless you are willing to hire everyone who applies and promote everyone who asks, you probably want to use some kind of skills test.
Adverse impact is determined by clustering people into groups and looking at statistics. This is not always the way the world works. For example, it would assume that every female, older candidate, member of a minority group, etc., are equally skilled for a given job. Common sense tells us this is seldom the case.
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When it comes to statistical analysis, it takes big numbers to get trustworthy data (about 100 people in each tested category). Testing for adverse impact means you need at least 100 people from each racial group; 100 people from each age group; 100 people from each, well, you get the picture. These kinds of numbers often take a long time to accumulate, and in some hiring locations, may take a generation or two!
Oh, and if you want to get technical, the last time I heard, the EEOC examines your hiring data using cross-tabulation and the Cochran-Mantel-Haenszel statistics.
And you thought the 80% rule was complicated!
Suppose you fail the adverse impact test. What happens then? You break apart the hiring process and examine the pass rates at each hiring-decision step (i.e., resume review, phone screen, test, interview). Don’t collect this data today? That could become a nasty problem in the future. Are third-parties exempt? Sorry, third-party recruiters, as well as anyone else associated with screening and hiring, are affected by these rules.
What’s the Risk?
While the DOL does not force organizations to follow the 1978 Uniform Guidelines on Employee Selection Procedures, it uses the guidelines as standards for adverse impact charges.
Few court cases, you say? Check out this link to the EEOC website and make your own decision. Be sure to check out the settlements page. The real cost is bad hiring decisions. Researchers estimate bad hires can cost from 20% to 50% of base salary, each year! (By the way, employee selection is not limited to hiring. It also includes promotions, terminations, and a host of other selection decisions).
Blending Best Practice with the Guidelines
I’ve presented the EEOC as a big stick throughout this article. At its foundation, the guidelines are not only a government recommendation, they are a best practice. That is, every organization can reap financial benefits by following them.
Who could argue against every job having a trustworthy set of basic, measurable competency standards? Or if every test and interview were as accurate and relevant as possible? Of if every job-qualified person was treated fairly, and every hiring and promotion system was monitored? Finally, who could argue against tighter hiring standards that lead to better employees?
What it Takes
Hiring is not about sourcing. Sourcing is only one part. Hiring is about defining standards, accurate measurement, and monitoring. In other words, it is about getting people with the right skills in the right job.
HR is generally a transaction-oriented department that processes work orders, mass- screens candidates, conducts workshops, and processes benefits and paperwork. These commodity functions can be easily outsourced. Imagine the value HR could bring to management if HR truly controlled the quality of employees who were hired and promoted?